The European Commission announced on Friday that the European Union is making available €1.5 billion ($1.6 billion) to fund Ukraine’s defence and reconstruction, financed by the proceeds of Russian assets frozen in the EU.
“There is no better symbol or use for the Kremlin’s money than to make Ukraine and all of Europe a safer place to live,” European Commission President Ursula von der Leyen posted on X.
Most of the money – 90% of it – will be used to reimburse EU countries for military aid they send to Ukraine, while the remaining 10% will be paid directly to Ukraine as financial aid for reconstruction.
Kremlin spokesman Dmitry Peskov said “such steps by the European Commission will not go unanswered.”
EU foreign ministers approved the payments in late June. Germany and the Czech Republic were selected as the first to use the proceeds to provide Ukraine with air-defence equipment and artillery shells, diplomats said at the time.
EU foreign affairs chief Josep Borrell said on X that “the EU will stand by Ukraine for as long as it takes.” He noted that the €1.5 billion in aid will fund “military capabilities and reconstruction.”
The aid is financed by the proceeds – such as interest – from Russian Central Bank assets in the EU, but not by the underlying assets themselves, which remain frozen.
“The immobilisation of the Russian Central Bank’s assets is a result of EU sanctions against Russia, adopted in the wake of its war of aggression against Ukraine,” a commission statement said on Friday.
“The extraordinary revenues generated in this context by the EU operators do not belong to Russia and are held by CSDs,” or central securities depositories. “The EU has now started to channel these revenues to Ukraine.”
The money has until this week been held by Brussels-based financial institution Euroclear. On Tuesday, Euroclear made it available to the commission, which in turn released it for Ukraine aid on Friday, the commission’s statement said.
The money is one of two sources of funding from outside of the EU budget that the bloc wants to use to fund Ukraine’s defence. The EU budget itself cannot be spent on weapons of war.
The other source is the Ukraine Assistance Fund (UAF), a pot now worth more than €6 billion under the European Peace Facility (EPF), an off-budget military aid fund paid into by EU member states.
However, every member state has a veto over the EPF, and Hungary – which opposes arming Ukraine – is blocking the EPF payments, despite having allowed the creation of a dedicated budget for Ukraine under the EPF.
Similarly, delicate legal footwork was needed to overcome Hungarian opposition to the use of the proceeds from the frozen Russian assets.
The foreign ministers’ approval of the actual payments in June followed an earlier agreement, in May, to the principle of using the proceeds to buy arms for Ukraine.
A legal analysis concluded that because Hungary abstained on the May decision and the money is not from the EU budget, Budapest’s veto did not apply to the decision in June.
Gergely Gulyás, an aide to Hungarian Prime Minister Viktor Orbán, on Friday accused Ukraine of “blackmailing” Hungary because of its “pro-peace stance” by preventing oil deliveries to the country, according to an X post by the Orbán government’s communications chief, Zoltán Kovács.
According to the European Commission, around €210 billion worth of Russian Central Bank assets are frozen in the EU. Euroclear recently announced that the assets had made around €4.4 billion in interest in 2023.
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